Volatility in the stock market, rising interest rates, the threat of tariffs torpedoing international trade deals while driving up costs for U.S. manufacturers and effects of changes in federal tax law are among the factors adding new levels of complexity to financial decision-making, according to the six financial professionals who took part in a forum in Suffern on Oct. 30. The event was titled “Navigating the Financial Markets in the Current Administration.” It explored the effects Trump administration policies have been having on areas such as real estate, banking, securities, taxes and private equity deals.
Laurence Keiser, an attorney and accountant who is a partner in the New York City and White Plains firm Stern, Keiser & Panken LLP, said that the true impact of what the Republicans touted as a significant tax cut for everyone will soon be known. “I think a lot of people are going to be surprised when they get their  returns back from their accountants and see that they maybe haven’t had a tax cut at all. Maybe they’ve had an increase.” The capping of federal deductibility of state and local taxes (SALT), especially real estate property taxes, at $10,000 is certain to have a major impact on many. Still uncertain is the impact of changes in the federal tax brackets. “The brackets have been broadened so, although they’ve all been lowered a little bit, there’s more income going to be taxed at higher brackets,” he said.
Keiser said that lowering the corporate tax rate to 21 percent has not had the stimulus effect which was advertised. “I think it’s been halfhearted. To give a $2,500 bonus to your employees, that’s a stimulus, so they buy a little more at the grocery store that week, but I don’t think we’ve seen the kind of investment in the U.S. that we’ve hoped to.”
Elizabeth Brucker, a mortgage loan originator in residential lending for First County Bank, said interest rate hikes by the Federal Reserve have contributed to the housing market slowdown, while the new limitation on SALT deductibility appears to be having a greater psychological impact. People in what she calls the “sandwich” level of home sales, not low-priced and not mansions, $350,000 to $800,000, are “…thinking about the taxes they have to pay. They’ll be paying $5,000 to $10,000 more. This is hurting their pockets. This could mean the family vacation they were going to take the kids on, now they have to sacrifice, or maybe [sacrifice] buying a new car,” Brucker said.
Bill Krivicich, chief investment officer for Gary Goldberg Financial Services, said that while unemployment rates have been low, “..it really comes down to what are the advancements in productivity.” He said that some wage inflation is good because it means people have more money in their pockets.
Louise Phillips Forbes, a real estate broker with Halstead Manhattan, suggested that real estate is the greatest tool for creating wealth and said that uncertainty, terrorism, market volatility and rising interest rates have combined to get would-be buyers off the fence. She said people could remove some uncertainty by locking in today’s interest rates in financing their real estate deals: “Buy more today and less tomorrow,” Forbes said.
Ted Yang, managing director of the Westbury Group, an investment bank for entrepreneurs located in Westport, told the gathering that he does business in China and believes that President Trump will want to resolve the trade issues before the 2020 election. “I think after the midterms you’re going to see more moves to resolve these issues.” Yang said his experience is that the Chinese he knows still are very upbeat about dealing with America.
Yang notes that a great deal of capital is available for buying businesses here at home. “If you’ve got cash flow, people are paying high multiples for that.” Yang says it’s akin to real estate: “There is a demand for quality. If you have a better company, whatever metric you want to use … you’re going to see deals that still gravitate to you.”
Gary Goldberg, founder and CEO of a financial services company, warned that people heavily invested in mutual funds could be exposed to unexpected taxes for 2017 due to the high level of stock trading by the funds in the current volatile market. “Brace yourself for a 1099 (tax form) that’s gonna be hurtful for embedded gains in funds,” he said. The forum took place at the Montebello Mansion, where Goldberg’s firm has its offices.
Sponsors of the event included Westfair Communications, publisher of the Westchester County Business Journal, the Fairfield County Business Journal and WAG magazine; the real estate firm Compass; Halstead Real Estate; and Gary Goldberg Financial Services.